Telepocalypse

Flying lessons

I was going to describe our journey down from Edinburgh to Cornwall as a fiasco, but dictionary.com informs me that...

fi·as·co n., pl. -coes or -cos. A complete failure.

...which isn't quite true as we did get there, and in one piece. But a 6½ hour delay with two small children, and zero apologies or information from airline Flybe for the first 6 of those hours isn't my idea of a great customer experience. Oh, and why not change gates at the last minute to the other end of the airport, and not announce anything. Hiding behind boilerplate "apologise for any incovenience caused" just doesn't cut it -- show some humanity, please. It was your chance to demonstrate you cared and you fluffed it.

Despite this attitide issue, the airline is doing rather well, with a profitable 2005. This is in contrast to another British airline with regional roots, bmi, which is haemorraging passengers. The differences in their strategies are illuminating for telecom network operators.

bmi operates from London Heathrow as its primary base. It's a member of Star Alliance. They're the second-biggest airline at LHR behind British Airways, but with a UK and European footprint -- they have very few intercontinental flights. They lack BA's economies of scale, and the European network can't be cross-subsidised by the intercontinental network. BA have ten or more flights a day from New York to London, say; a very attractive proposition to a corporate travel manager negotiating a preferred supplier.

Yet bmi's service is quite good, with all the features and frills you might expect. Morale seems quite high when I fly on them, and the staff are very professional. The prices of the fares are often agressive, particularly for one-way trips where BA demands you mortgage your first-born for organ harvesting prior to boarding.

Now, let's contrast this with Flybe. At Exeter airport, they had a big poster up on the wall where they had caused us to gather a good 20 minutes before really necessary. (Daughter #1 naturally waits until the very moment of boarding to decare a wee-wee situation, thus risking our ability to pre-board at all. Never mind. She got so excited on the plane playing with other kids she even stuck her hands in her pockets and pulled her trousers and knickers down in the aisle for no real reason. I hid down the back of the plane in the galley with her little sister and disclaimed all responsibility or association with her.)

Here's Flybe's product promise:

It's pretty ordinary. They aren't offering you a back massage, gourmet meal, and compimentary limousine to your destination. In fact, I wouldn't get too excited about that high-frequency schedule either (it's a bit of an exaggeration), and I pray on every flight never to be delivered directly to the runway-less heart of Edinburgh.

Now for their distribution strategy:

That's definitely different. This is just the route map from Exeter. And believe me, Exeter (pop. 111,000) to Norwich (pop. 121,000) isn't the most heavily trafficked route in the world. But to drive it means a time-destroying and soul-draining trip round London and the M25. Flybe's way of dealing with airline competition is to not have any, and just stick to intermodal competition.

Now, on to telecom. Many operators, particularly mobile ones, have spent vast fortunes on trying to create differentiation via their product strategies whilst simultaneously having near-identical distribution strategies. In this case, "distribution" includes not only network coverage, but also ability to roam, spread of retail outlets and ease of payment. Yet some operators did do things differently. Verizon Wireless in the US not only had the "can you hear me now" campaign (emphasising coverage), but also sewed up key markets like Washington DC by getting their network gear installed on the Metro system. In the process, Verizon whipped Sprint's ass (same technology), where features and content had taken over the marketing message.

If I had the time and budget, I'd love to get a panel of industry experts together. They'd rate each carrier on the degree to which it had distinguished itself in terms of product and distribution strategies from its competition. And then we'd have a beautiful pair of axes onto which to place the results as a scatter graph. I'd then colour each point according to the rate of return of each telco over some reasonable period, maybe with a fudge factor to correlate against the overall market.

Which strategy is winning? Product or distribution? I think I know, but the evidence needs a lot of work to gather.

Posted by Martin Geddes at 2:31 PM

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